6. Using Credit
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1. Using credit is the ideal way to meet basic living expenses.
a. True
b. False
2. An individual can be overusing credit even if he or she can afford to make the minimum monthly payments on time.
a. True
b. False
3. Credit should not be consistently used for purchasing nondurable goods.
a. True
b. False
6. Using Credit
6. Using Credit
6. Using Credit
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DATE MODIFIED: 10/27/2018 1:48 PM
9. The key to creditworthiness is to maintain your debt safety ratio at 50% or above.
a. True
b. False
10. Debit cards work like writing a check.
a. True
b. False
11. A retail charge card can be accessed by writing checks against demand deposit.
a. True
b. False
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12. Retail charge cards are cheaper than credit cards provided by financial institutions.
a. True
b. False
13. Most families have only one source for consumer credit.
a. True
b. False
14. The purpose of a credit investigation is to evaluate the kind of risk you pose to the lender.
a. True
b. False
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15. A credit card application requests information that is routinely used to predict creditworthiness.
a. True
b. False
16. Credit reports on individual borrowers are provided by credit card issuers.
a. True
b. False
17. The most common method used by lenders to apply finance charges on credit cards is the average daily balance
method including new purchases.
a. True
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b. False
18. For a fee, local credit bureaus can provide credit information to members about prospective borrowers in their
community.
a. True
b. False
19. You should review your credit bureau file every year.
a. True
b. False
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20. Your credit bureau file often includes information about your political and religious affiliations.
a. True
b. False
21. Credit scoring systems are often used by lenders to determine applicants’ creditworthiness.
a. True
b. False
22. A credit card user’s credit rating will be hampered if he or she pays only the minimum monthly payment on a credit
card.
a. True
b. False
6. Using Credit
6. Using Credit
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25. The intent of the Wage Earner Plan is to eliminate all of a debtor’s obligations.
a. True
b. False
26. A Chapter 7 bankruptcy filing would result in the discharge of most of your debts.
a. True
b. False
27. Families that have a steady source of income and a reasonable chance to repay debts would choose Chapter 13 rather
than Chapter 7 of the U.S. Bankruptcy Code.
a. True
b. False
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28. The majority of persons filing for bankruptcy choose Chapter 7 of the U.S. Bankruptcy Code.
a. True
b. False
29. You should not give your credit card account number over the phone to people or organizations who call you.
a. True
b. False
6. Using Credit
6. Using Credit
6. Using Credit
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35. _____ is a reason that people use credit.
a. Being able to increase disposable income
b. Being able to provide payments for living beyond one’s means
c. Being able to afford impulse purchases
d. Greater affordability for a luxurious lifestyle
e. Being able to meet a financial emergency
36. To establish credit, you should first:
a. open savings and checking accounts.
b. use credit extensively.
c. arrange for a small loan.
d. pay cash for all purchases.
e. arrange for a large loan from close relatives.
6. Using Credit
6. Using Credit
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e. 5%.
40. If your monthly before-tax income is $2,000 and your monthly take-home pay is $1,500, your maximum monthly
consumer credit payments should not exceed:
a. $600.
b. $450.
c. $400.
d. $300.
e. $200.
41. Clare’s annual gross salary is $36,000, and her after-tax income is $28,800. What is Clare’s maximum recommended
monthly consumer credit payment?
a. $600
b. $480
c. $450
d. $360
e. $200
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42. With a bank credit card, you can often avoid interest charges if:
a. the account balance is paid in full every month.
b. at least half the account balance is paid every month.
c. the minimum payment is made every month.
d. the account is a revolving credit account.
e. the account balance is below the credit limit.
43. Mike has a MasterCard with an annual fee of $25, an 18% interest, and a $1,000 credit limit. He always pays the total
outstanding balance monthly. His most recent monthly statement lists the previous month’s payment, new charges in the
current month totaling $1,500, and a $30 fee. The fee is most likely the result of:
a. interest charges.
b. his annual fee.
c. an over-the-limit fee.
d. a late payment.
e. transaction fees on purchases.
6. Using Credit
6. Using Credit
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a. Overdraft protection lines
b. Home equity credit lines
c. Credit cards
d. Unsecured personal credit
e. The Wage Earner Plan
47. A payment made using a(n) _____ is equivalent to paying by cash.
a. retail credit card
b. debit card
c. affinity card
d. reward card
e. student credit card
48. Sheldon has a home valued at $108,000 with an outstanding mortgage of $70,000. If his lender is willing to provide a
home equity loan of up to 80% of the market value of his home, how much can Sheldon borrow using a home equity
loan?
a. $86,400
b. $80,000
c. $38,000
d. $30,400
e. $16,400